Tips to increase your company’s profitability

The profitability of your company, understanding by this concept the proportion that exists between the resources that are invested in the operation of the same one compared to the benefits and/or profits that are obtained is an essential indicator at the moment of making an analysis of the financial situation.

Which the organization is found as well as to evaluate the quality with which the administrative management of the same one is being carried out.

In order to have a thorough understanding of the company’s financial health, it is essential that you have up-to-date financial statement information and that you know the status of each of the key indicators you have in your business, so that you know what you are investing in and whether it is being profitable.

We believe that your company can effectively achieve its business goals by having the strategic information and thus achieve a controlled and accelerated growth.

Today we share tips that will help you raise the level of profitability of your company:

Keep proper control of your expenses

Controlling your expenses has the advantage that each weight you save in a smart way will become an extra weight you will have as a gain. For this purpose, it will be very useful to prepare a monthly cash flow statement in which you can analyze what items are being spent more in your company and in which adjustments can be made to allow you to be more efficient.

It is also recommended that you implement the practice of budgeting, which means that you will be periodically monitoring expenses and checking if the policy defined for them is being followed by each of your managers.

Increase your profit margins

The profit margin is the difference between the sales price of your product or service and the cost of producing it which the company pays. There are several ways to increase the margin as they are:

  • Increase prices.
  • Reduce the costs of the products or services sold.
  • A mix of both options.

If you do not agree to increase your price, it is important to remember that consumers will accept an increase in price as long as it is competitive with other offers in the market and you are offering added value, so the price is secondary.

The important thing is to analyze it and seek a balance in which you can increase your profits without sacrificing the amount of sales due to customer dissatisfaction.

Manage your inventory efficiently

The correct management of your inventories is one of the key factors that affect the good performance of companies and therefore the increase of their profits. It is essential that the company has a well managed and controlled inventory in order not to generate unnecessary costs.

As we mentioned in the article “Benefits of an inventory control system”, inventory management is composed of the control and planning of them, in general terms it is about understanding three important factors:

  • How often should the inventory level be determined for each item?
  • When should a purchase order be placed with the supplier?
  • What is the optimal quantity to order?

Inventory tracking and control is a core activity in your company since having a reliable visibility of it you can make better decisions as well as reduce costs by not carrying excess or shortage of goods and therefore provide better service to your customer.

Analyze the profitability of your client portfolio

Being a customer service focused company is one of the goals that many companies have. Today’s marketplace is highly competitive and focusing on the customer can be a very important and sustainable advantage.

One way to find out which customers are generating the most profit for you is through a current and potential profitability analysis in which you will identify which customers it is convenient to invest more effort in since they will have a greater impact on profitability, thus you will be better off retaining them and building their loyalty.

Try to have as much information as possible about your customers, thanks to this information you can create promotions and offers of products and / or services that will generate more value for your current customer.

Increase re-purchases of your product and/or service

When you think about increasing sales, you have the idea of increasing the number of clients you currently have, and thus increase the amount of invoicing; however, each new client is a significant cost for the company, since it is required to make an investment to find, qualify and serve them.

Each current client that the company has and that makes a repurchase has a much lower cost and offers more profits, therefore it is more profitable. Also if you consider that a person to repeat a purchase is because he is satisfied with the company then this person can in the near future be a referer and promoter of your brand which is convenient since you would be getting new customers at a lower cost than if you found them by your own means.

As you can see, in order to create profitability, it is important that you focus on offering a high quality product or service to your customers that will provide them with added value. To improve your company’s profitability, focus on offering quality services that really help your customers.

Technology as an ally

A key factor for the profitability of your company is the integration of information to make timely and accurate decisions, avoid rework and minimize the margin of error when entering and managing data and indicators important to business operations.

Technological solutions play an important role in this area by optimizing internal processes and saving costs, thus achieving a more efficient use of both capital and human resources.

Lean on tools that allow you to maximize the potential of your business to focus your efforts on the activities that are really generating a value for you, so you can plan more effectively to achieve your strategic goals.